Stanislau Bagdankevich: "Preferences annulment making a serious blow" :: Charter'97 :: News

Today the resolution of the European Union on annulment of preferences for Belarus has come into force. In the opinion of a well- known economist former head of the National Bank of the Republic of Belarus Stanislau Bagdankevich the annulment of preferences will make a serious blow on the economy of Belarus. ”Effectiveness of the Belarusian economy is extremely low. It is its main problem. In the current year it has decreased at the micro level by another 4-5%. The profitability of the economy is constantly decreasing. Under the Soviet power it comprised 30%, under Lukashenka it has dropped to 14 % and this year it has decreased to 11%. As of today around 60 % of all functioning enterprises are either unprofitable or their profitability is in the range of 0-5% and such profitability cannot provide the expanded reproduction”, Stanislau Bagdankevich declared in his interview to the Charter’97.

-How do you as the former head of the National Bank estimate the losses that Belarus is to incur due to annulment of the European Union’s preferences?

-It will be rather difficult to overcome those problems, especially for our light industry. Even now its profitability fluctuates between 0 and 4%. That is why the annulment of preferences will make a serious blow to it.

-Will credits help to solve the problem of preferences annulment?

- As far as the credits are concerned, it is not clear how they can help in solving that problem. Belarusian banks may be given the task for attraction of credits at the international monetary market. But as of t 1 January this year the banks have already attracted the external borrowings totaling to 800 million dollars.

Borrowings may not be used for compensating the losses caused by the preferences annulment. They are designated for technological, technical upgrade of manufacture; it’s restructuring, which will provide decrease of the labor consumption and power consumption of manufacture. Nobody will grant credits for compensating the losses. Furthermore the credits have to be repaid.

-What can the sate do to minimize the sanctions consequences for enterprises?

-VAT may be decreased; taxation debts may be restructured thus compensating the decrease of sales proceeds, which is unavoidable after preferences annulment. The technological restructuring, manufacture upgrade are necessary. That is a complex task, which is necessary to be solved as soon as possible. So the global changes in economics are required which are impossible without efficient owner. And for this privatization and stock market development are necessary. They may ensure direct investments to Belarus.

-Then what is the effectiveness of the Belarusian economy?

-The effectiveness of the Belarusian economy is extremely low. It is its main problem. In the current year it has decreased at the micro level by another 4-5%. The profitability of the economy is constantly decreasing. Under the Soviet power it comprised 30%, under Lukashenka it has dropped to 14 % and this year it has decreased to 11%. As of today around 60 % of all functioning enterprises are either unprofitable or their profitability is in the range of 0-5% and such profitability does not provide the expanded reproduction. We lack resources for maintenance, for workers and employees stimulation, for modernization, etc. and that is the most negative indicator of our economy.

15-20% of our enterprises of certain branches ‘are carrying’ the whole economy. Among those are production of fertilizers, oil refinery, transportation of power resources, heavy machine building. It is unnatural when some live at the expense of the others. The economy operators should work under equal conditions. It is the principle of free competition .Its violation results in monopolization and general decrease of the effectiveness.

1 million people out of 4 million staff actually work at the effective enterprises. The others work at enterprises, which survive only due to the command administrative economy, which is historically non-effective.

-Won’t the economic problems initiate the steps towards liberalization?

- The large-scale privatization was declared at the beginning of the year. But our authorities are not likely to accompany their words by actual deeds. They are planning to privatize cement-producing works. But no complex systemic approach is visible. The program of reforms has not been declared. Lukashenka personally makes decisions on privatization of each particular enterprise.

Furthermore, privatization of low profitable manufactures, which are generally put on sale, has to be radically changed in terms of the owner. Denial of administrative restriction, transfer to the application principle, selling at low prices. They are not available.

-And what about selling of Beltrasgaz, intensions to privatize the “Krinitsa” brewery, the Grodno tobacco factory?

Beltrasgaz is the family silver of Belarus. I am not for selling of 50% share to Russia. It is necessary to create the international consortium with attraction of western capital. It is reasonable to establish such consortiums in the field of oil refinery but not to give everything into the hands of Russian oligarchs. Why has not Belarus tried that? Probably our eastern neighbor has strongly pressed Lukashenka. Though any privatization finally results in the growing ownership management efficiency.

-Why international consortiums with attraction of the western capital are not established?

-On the one hand as far as the Beltrasgaz is concerned it is logical because Russia is our supplier of energy resources. On the other hand it leads to dependence on Russia. It is the government to blame for not protecting our national interests.

The conditions should be created for the western capital to flow to us. To turn down “the golden share”, administrative interfering with the manufacture. To say nothing of the development fund establishment at the account of illegal withdrawal of the manufacturers’ super-profits .It is unnatural. In other countries the economic relations are regulated only by the law. But in our case the manual management is practiced through constant interfering into business not only at the governmental but also at the local level. All that prevents the attraction of western capital. And due to the absence of guarantees the investments from the East are also insufficient.